How Roku used the Netflix playbook to beat bigger players and rule streaming video
When Netflix founder Reed Hastings spun off the streaming video box he was developing to a little-known start-up called Roku in 2008, he thought it would probably fail.
“There was Xbox and PlayStation and Samsung and Apple TV,” Hastings said in an interview. “Frankly, we didn’t think Roku had much of a chance.”
After first meeting at a conference, Roku CEO and founder Anthony Wood pestered Hastings for months to let his company make a streaming video box for Netflix. Hastings at the time wanted to build the box in-house at Netflix. So the two struck a deal — Wood took a part-time job at Netflix to make the device while remaining CEO of Roku, which had about 15 employees.
That experiment lasted nine months. Hastings wanted Netflix to be available on all sorts of streaming devices, such as Microsoft’s Xbox, Sony‘s PlayStation, and Apple TV. Those companies felt Netflix’s hardware posed a threat to their own businesses. Moreover, people surveyed in focus groups said they wanted a box that could stream more than just Netflix.
So Hastings decided to spin out the division to Roku. Wood received an unfinished device, patents, 20 to 30 Netflix employees (more than doubling the size of Roku) and some cash. In return, Netflix received about 15% of Roku’s equity.
Netflix would later sell its Roku shares to venture capital firm Menlo Ventures to avoid the perception of being conflicted by favoring one streaming distribution manufacturer over another. When Netflix sold its stock in 2009, it claimed a $1.7 million gain on a $6 million investment.
If Netflix had held, its stake would be worth nearly $7 billion today. Roku has been one of the pandemic’s big winners. Shares have have gained more than 480% from March 17, 2020, as the media world shifted to focus on streaming video. Today, Roku’s market capitalization is more than $45 billion.
Wood, who owned more than 28% of Roku at its initial public offering but now owns less than 15% of shares outstanding after various sales through the years, has an estimated net worth of about $7 billion.
“Obviously in hindsight, we missed a fortune,” said Hastings.
To call Roku the offspring of Netflix is literally and figuratively true. While it’s not a carbon copy of its parent, Roku took more than just hardware from Netflix — it took a strand of its corporate DNA.
Wood downplays the comparison. “My relationship to Netflix was obviously very important to Roku,” he said in an interview. “But I only worked there nine months.”
But Roku and Netflix have become market-leading companies worth tens of billions of dollars by out-competing media and technology giants. Both companies could have been acquired in their early days for a fraction of what they’re worth today. Both pivoted their businesses to adapt for streaming video. And both have unusual corporate cultures that can alienate employees who say they live in fear of being fired.
Read more on Roku’s culture: High pay, few extras, no performance reviews
In fact, until recently, Roku’s headquarters were literally next door to Netflix in Los Gatos, California.
Just as Netflix defied the odds to dominate entertainment, Roku overcame widespread industry confusion and doubt to become the U.S. market leader in streaming video distribution. As the media industry has reorganized en masse for a direct-to-consumer world, Roku has become an indispensable intermediary that can guarantee distribution to more than 50 million households.
For its next act, Roku could misdirect the media and technology world again to build its content business — the same kind of move that propelled Netflix to world-beating success.
Pivot, pivot, pivot
Just as Netflix began as a DVD rental company, Roku’s first attempts at business bear little relationship to how it makes money today.
Wood, who graduated from Texas A&M with a degree in electrical engineering, founded Roku in 2002 as a maker of high definition video players. Wood initially funded Roku himself with money he had earned from selling other businesses, including DVR maker ReplayTV, which digital audio device maker SonicBlue bought for $120 million. (SonicBlue has since gone out of business.)
Wood then added streaming audio devices to compete against Apple iPods. Unfortunately, Spotify didn’t exist yet.
“I was a little early on that one,” Wood acknowledged.
Next, he added digital signs — common in sporting event concession areas and even used by CNBC for background monitors. Wood eventually spun that unit out to a separate company called BrightSign.
Then came the Netflix deal.
Wood saw a future where Roku would be a centralized distribution platform for digital television. Although Roku seemed like a hardware company, Wood actually envisioned Roku as a services company, making its revenue from channel store fees and a share of advertising from every TV app carried by the platform.
Netflix was Roku’s first customer, followed by Amazon Video on Demand and MLB TV. More recently, Roku added HBO Max, NBCUniversal’s Peacock, Disney+ and many other subscription streaming services — including Roku’s own The Roku Channel. Roku has become the operating system for more than 15 brands of smart TVs, baking its software directly in consumer’s TV sets — just as Wood predicted more than a decade ago.
The pandemic has accelerated Roku’s foothold in American households. With more than 53 million active accounts, Roku has consistently been the leader among all streaming platforms in the U.S., although Amazon is catching up, based on data from Parks Associates. Roku has taken a 33% to 39% market share every year since 2015. In the first quarter of 2021, Amazon Fire TV tied Roku for No. 1 at 36%. Apple TV was third with 12%, followed by Google Chromecast at 8%.
Wood credits some of Roku’s success to Clayton Christensen’s famous business concept of “The Innovator’s Dilemma” — where incumbent companies couldn’t focus on streaming video because they were too busy protecting their older, linear cable TV models. Christensen’s book just happens to be one of Hastings’ favorites, too.
Wood also noted that Roku’s relatively unchanging user interface and simple remote control have appealed to customers because users want simplicity.
“Many companies just don’t really understand the attitude people have when they’re watching TV,” said Wood. “People want to sit there, drink their beer, and watch TV.”
As Wood envisioned, Roku now makes the majority of its money from services — much of which comes from taking a share of every media company’s total streaming advertising time and selling it. When Roku agreed to distribute Peacock, NBCUniversal‘s streaming service, it took about 10% of what would have been Peacock’s ad inventory to sell for itself, according to people familiar with the matter who spoke on condition of anonymity because details of the deal are private.
Using its viewership data, Roku is developing its own advertising technology to better target commercials than what’s possible on linear television. In March, Roku acquired Nielsen’s advanced video advertising business to begin dynamically inserting linear TV advertising, which increases the number of ads that can be showed on a given show or movie and can be used to better target ads to users.
More recently, Roku has invented two content arms of its own. The Roku Channel licenses content from other media companies and has acquired some original programming, including the content that used to be Quibi, the short-lived streaming service founded by Jeffrey Katzenberg and Meg Whitman. Roku sells advertisements against the programming. Roku is also launching an advertising brand studio to help companies make their own original content.
Last year, Roku made about $510 million from its hardware and branded smart TVs. It made $1.3 billion from platform services.
“We focused on the idea that all TV was going to be streaming,” Wood said. “It was obvious. I’m not sure why there were skeptics.”
A world of skepticism
For years, Wood struggled to find outside financing. Venture capitalists consistently told Roku it was a hardware maker, and hardware wasn’t a good business. Some potential early investors were taken aback by Roku’s modest headquarters in Saratoga Office Center, in Saratoga, California — an uncommon starting spot for Silicon Valley darlings.
The only person who seemed to believe was Menlo Ventures partner Shawn Carolan.
“Silicon Valley does not like to invest in hardware companies,” Carolan told CNBC. That’s because hardware can often be easily replicated and frequently costs nearly as much to manufacture and market as it does to sell. Roku’s hardware, even today, is a zero-profit margin business, according to a person familiar with the matter.
But Carolan saw a clear go-forward strategy based around services.
“I remember this PowerPoint deck I presented around 2009, 2010 where I kind of laid it all out,” Carolan said in an interview. “We called it our popcorn strategy, because movie theaters don’t make money off movies, they make money off the popcorn. How are we going to continue to incrementally add services revenue?”
Wood financed Roku’s Series A round himself. Netflix pitched in $6 million for the Series B as part of the 2008 box transaction. Roku’s Series C, split in two parts in 2008 and 2009, featured one venture capital firm — Menlo Ventures. Carolan and his partners would reinvest again in 2011’s Series D, 2012’s Series E and finally 2015’s Series H — the last round needed before Roku’s IPO.
By 2017, including the Netflix shares it bought, Menlo owned about 35% of all Roku shares. Carolan stayed on Roku’s board from 2008 to 2018.
As the company gained scale, it proved it could make money from its channel store, through revenue shares with media companies, and advertising. Wood expected to hear from other companies interested in acquiring Roku, but few came calling.
Roku held talks with Intel when it toyed with developing OnCue, an Internet-based TV platform, in 2012, according to people familiar with the matter. Intel was eventually willing to pay about $450 million for Roku, but Wood asked for $1.5 billion, according to one of the people. Wood, who several co-workers acknowledged had a quirky personality, told an Intel executive he asked for $1.5 billion because he wanted to open a university in Texas, and that price would cover the expense, according to a person familiar with the talks. The large gap in value doomed the transaction.
About a year later, Amazon approached with an initial offer of about $300 million for the company. Those talks progressed in seriousness, leading Roku to drop its ask all the way to about $690 million, one of the people said. Still, the gap proved too large to cement a transaction.
After that, the offers basically stopped.
“We’ve had less acquisition offers than is normal for a company as successful as Roku,” said Wood, who said he didn’t remember details about the Amazon and Intel offers. “I think it’s because people don’t understand the company. For a long time, they didn’t.”
Waverley Capital managing partner Daniel Leff, who sat on Roku’s board from 2011 to 2018, said the lack of takeover interest from big technology and media companies was stunning.
“Lots of CEOs of big media companies came to spend time with Roku to figure out what it is, what’s streaming, how is it going to disrupt my business?” Leff said. “And I will say, unequivocally, there wasn’t one media executive — and they’re all very smart in their own right — there wasn’t one who believed Roku would be successful, even when it was generating hundreds of millions of dollars in revenue. Even when it went public.”
Roku first attempted to go public in 2014, but bankers told Wood there wouldn’t be appetite for investment until services revenue was 50% of total sales.
“They told us we couldn’t get out, or not at a good price, until we could prove that platform revenue was real,” Carolan said.
So Roku got serious about its platform business. When Roku released its S-1 filing — the document all companies must publish before going public — player revenue in the first half of 2017 represented 59% of total revenue and declined 2% year over year, while platform revenue represented 41% of total revenue and grew 91% from a year earlier.
When Roku went public on Sept. 28, 2017, Carolan broke down in tears.
“I thought, wow, the world finally sees what my partners and I have seen for the last ten years,” Carolan said. “It was just super emotional. And for the past few years, obviously more and more people are finally getting it.”
What’s next: Content
Wood said he’s spending much of his time now on charting out a strategy for The Roku Channel.
Most of the content on Roku’s channel is licensed from other media companies and studios — and it’s not necessarily their best stuff. The 40,000 free movies and TV shows are largely back-end library content that media companies have deemed unimportant for own streaming endeavors. When Roku can get its hands on more popular content, it tends to be limited — for instance, it only has one season of “The Bachelorette” (Season 13, starring Rachel Lindsay).
In addition to licensed content, Roku has begun dabbling in original programming. Earlier this year, Roku bought more than 75 shows that Quibi created for its short-lived service. It also acquired “This Old House,” which is still making new episodes in its 42nd season. Roku has programming for both kids and adults, building offerings for anyone in the family.
There’s some evidence the original programming is finding an audience. The top ten most-watched programs on The Roku Channel from May 20 to June 3 were all Roku originals. Since adding the Quibi library last month, according to Roku’s own data, more Roku users have seen that programming in two weeks than Quibi users in its six-month lifetime.
The strategy at this point looks a lot look like — surprise — Netflix. In Netflix’s early days, it was happy to license whatever content media companies would give it. Former Time Warner Chief Executive Officer Jeff Bewkes famously called it “The Albanian Army,” emphasizing its small stature at the time.
Now, Netflix spends $17 billion on content a year.
Roku plans to spend more than $1 billion on content next year, according to a person familiar with the matter. Wood declined to comment on the exact total, but did admit the budget will grow next year and in years to come.
Wood also said The Roku Channel creates a virtuous cycle. Roku sells advertising against every ad-supported application on its platform. With its own channel, Roku can offer advertisers another way to market brands. That’s more money, which can be used for more content, making the channel a bigger draw for consumers — and more appealing to advertisers.
There’s real money to be made in free ad-supported video. ViacomCBS’s Pluto TV will top $1 billion in ad revenue next year, CEO Bob Bakish said at a recent investor conference.
Roku announced in March it was raising $1 billion — money that ex-board member Leff expects will go largely toward content. With a market capitalization above that of media companies like Discovery, which is merging with WarnerMedia, and ViacomCBS, Roku is a theoretical buyer for Lionsgate and AMC Networks, said MoffettNathanson media analyst Michael Nathanson.
For the time being, Wood is talking like a CEO who wants to stay under the radar. Wood emphasized Roku was a distribution platform first and a content company second. But if content producers don’t watch out, Roku may “eat their lunch” — just like Netflix did, predicted Nathanson.
“This reminds me so much of Netflix in its early days,” Nathanson said. “I used to interview [Netflix Co-CEO] Ted Sarandos at conferences ten years ago, and he’d say, ‘oh, we’re happy with just one or two original shows.’ Meanwhile, they’d be laddering up into better content. I’d argue companies giving Roku content are digging their own grave.”
Hastings told CNBC he isn’t worried about Roku as a competitor because its goals as an advertising-supported service will be different than Netflix, which is subscription based and has no commercials.
“They’re not a big threat for us,” Hastings said.
Wood agreed with Hastings that The Roku Channel isn’t in competition with Netflix. Roku is looking to capture a person’s attention so it can sell advertising — but it doesn’t need to spend so much on content to keep a person paying $5, $10 or $15 each month. The Roku Channel is available on Amazon Fire TV, Apple iOS and Google’s Android, though the company prefers users watch on Roku’s platform, where it can better monetize viewership data.
“We have less expensive content than a subscription service because it’s not required for us to be successful,” Wood said. “For us, it’s about helping users discover content that appeals to them.”
Testing its leverage
Still, Roku may be able to increase the quality of licensed content over time. Direct-to-consumer streaming apps need global distribution, and Roku has a roadmap to enter countries around the world. So far, Roku is also in about one-third of all smart TVs in Canada and is the second-largest operating system for smart TVs in Mexico. Europe is its next likely expansion opportunity, said Nathanson, where Google’s Android TV is the dominant incumbent.
As Roku signs new carriage agreements, it could start demanding that each company give it better content for the Roku Channel. Roku asked for quality titles in its negotiations with WarnerMedia and NBCUniversal, according to people familiar with the matter, but it was rebuffed. It settled on paying for a few older, relatively unpopular series, such as NBCUniversal’s “Coach” — for now.
In recent years, Roku has become more aggressive with its carriage agreement demands, including asking for more advertising inventory, higher app store fees, and better content for The Roku Channel. That’s led to delays in reaching agreements with both HBO Max and Peacock. In April, Roku dropped the YouTube TV app from its platform for new customers in a dispute over manipulating search results and hardware requirements. The main YouTube app remains for everyone, but that deal is up later this year — and could test Roku’s leverage.
“They have to be careful,” said Leff. “Netflix is still one of their biggest partners. They don’t want to compete too hard against all of their content partners.”
Then again, if media companies don’t work with Roku, who can they turn to for distribution? Apple, Google and Amazon are still bigger long-term threats, rich with both data and cash, with the power to outspend legacy media for content if they desire. Roku has used its “we’re just the little guy” approach to its benefit throughout its existence.
For now, Roku’s media partners aren’t worried.
“I don’t think they’re challenging to do business with given their market scale,” said Steve MacDonald, president of global content licensing for A+E Networks. “They’re very collaborative and open about information about how we can better monetize our relationship together. They promote our content. They’re good partners.”
That’s what the media industry used to say about Netflix.
Disclosure: Comcast-owned NBCUniversal is the parent company of CNBC.
Technology
Nvidia’s set to regain some China access. But it still faces eroding AI chip market share
Photo illustration of Nvidia’s H20 chip.
Vcg | Visual China Group | Getty Images
Nvidia‘s H20 chips are likely to return to China, but tech experts don’t expect them to be met with the same fanfare in the market in light of new competition and regulatory scrutiny.
The Trump administration last month gave Nvidia assurances that it would be permitted to resume sales of its H20 chips to China, after their exports had been effectively banned in April. It also announced a new “fully compliant” made-for-China chip.
The move was seen as a huge win for the company, which had flagged billions in losses due to the policy. But while the H20s might be returning to the Chinese market that doesn’t mean Nvidia will regain its former market share, analysts caution.
In a recent report, global equity research and brokerage firm Bernstein forecast that Nvidia’s AI chip market share in China would drop to 54% in 2025, from 66% the year prior.
This drop is only partly owed to complications with resuming chip supply, as Chinese AI chipmakers have been seizing more of the booming domestic market.
“U.S. export controls have created a unique opportunity for domestic AI processor vendors, as they are not competing with the most advanced global alternatives,” Bernstein’s report said, noting growing prominence of Chinese players such as Huawei, Cambricon and Hygon. “The localization ratio of China’s AI chip market will surge from 17% in 2023 to 55% by 2027.”
Other analysts such as The Futurum Group CEO Daniel Newman were more bullish about Nvidia’s bounce back in China. However, he also flagged potential market share erosion from Nvidia customers that might have found success with Chinese rivals while the H20 controls were in place.
It’s also worth noting that Bernstein’s predictions assume that broader U.S. chip restrictions will remain largely unchanged. That creates a dynamic where Chinese companies continue to develop and offer advanced chips, possibly eroding demand for outdated U.S. offerings.
Further easing?
Ahead of rolling back the H20 restrictions, Nvidia CEO Jensen Huang had been lobbying for more access to China, claiming export controls were inhibiting U.S. tech leadership.
While Trump administration officials had said the rollback was part of trade negotiations, analysts have echoed Nvidia’s basic argument that chip controls for the China market should be eased, thereby creating more dependency on U.S. tech offerings.
“The assumption is that by keeping U.S. technology companies in the China game, the U.S. can preserve and even grow its geopolitical leverage,” Reva Goujon, director at Rhodium Group, told CNBC.
In a report last month, Rhodium Group said that this logic may see the administration shift to a “sliding scale” approach to export restrictions that could allow U.S. chipmakers greater access to China as Huawei and other Chinese chipmakers continue to upgrade.
However, while Chinese AI developers will be happy to have increased access to Nvidia chips, Beijing isn’t expected to slow its efforts to steer companies toward homegrown AI infrastructure, according to Goujon.
She noted that the Cyberspace Administration of China’s recent summons to Nvidia was an obvious signal of the state’s intention to intervene in the local AI infrastructure market.
New Beijing scrutiny
According to the Cyberspace Administration of China, Nvidia met with Beijing officials on Thursday regarding national security concerns posed by the H20 chips, including potential backdoors that would allow parties in the U.S. to access or control them.
Beijing’s move appeared to come in response, at least partially, to new laws proposed in the U.S. that would require semiconductor companies such as Nvidia to include security mechanisms and location verification in their advanced AI chips. Nvidia later denied that its chips have any “backdoors” that would allow external access or control.
The move by Beijing was also likely an attempt to create some hesitation among Chinese AI developers looking to buy the new H20s, according to Futurum’s Newman.
“China wants to leave some levers in place to potentially restrict outside AI chips at some point down the line if and when it feels its homegrown technology is truly competitive,” Newman said.
Beijing has previously restricted American chipmakers’ business in China amid periods of intense technology and trade tensions between the two countries. Micron Technology, for instance, failed a cybersecurity review in 2023 and was subsequently blocked from critical IT infrastructure.
“The continued complexity of China-U.S. trade relations could bring further complications [for Nvidia] as negotiations continue and as China attempts to cement its own AI strategy,” Newman added.
Dylan Field, co-founder and CEO of Figma, signs the guestbook on the floor of the New York Stock Exchange in New York on July 31, 2025.
Michael Nagle | Bloomberg | Getty Images
Mark Zuckerberg may be the most famous college-dropout-turned-tech-billionaire. Dylan Field is the latest, after his design startup Figma soared in its stock market debut this week.
The two entrepreneurs have something else in common: close ties to Peter Thiel.
Zuckerberg got his first outside check for Facebook from Thiel in 2004, soon before leaving Harvard University to build his social network in Silicon Valley. Facebook went public in 2012, the same year that Field scored a Thiel Fellowship, which gives money “to young people who want to build new things instead of sitting in a classroom.” Over 300 people have been selected since its inception in 2011.
Field, now 33, was part of the second batch of Thiel fellows, a group of 20 entrepreneurs who each took home $100,000. The program doubled that sum earlier this year. Like Zuckerberg, Field came to Thiel from the Ivy League, having spent two and a half years at Brown University in Providence, Rhode Island.
On Thursday, Figma’s stock price more than tripled in its first day of trading on the New York Stock Exchange. It rose again on Friday, wrapping up the week with a fully diluted market cap above $71 billion. Field’s stake is worth about $6.6 billion. Zuckerberg, meanwhile, is now the world’s third-richest person, with a net worth of over $260 billion.
While the contours of Field’s story may sound familiar, he’s a very different kind of character.
“Dylan is, by far, the most humble billionaire I’ve ever met,” said Joshua Browder, CEO of legal services startup DoNotPay and a former Thiel fellow.
Mike Gibson, who used to help run the fellows program as vice president for grants at the nonprofit Thiel Foundation, contrasts Field with another tech luminary.
“He’s kind of like the anti-Steve Jobs,” said Gibson, a co-founder of 1517 Fund, a venture firm that prides itself on investing in dropouts. “When it comes to Jobs’ legend as this hard-charging a–hole, Dylan is the opposite.”
The Apple co-founder, who dropped out of college after one semester, died of cancer in 2011, as his company was on its way to becoming the most valuable business in the world.
Field was poised to officially enter the billionaire ranks almost three years ago. With Figma having emerged as a leader in web-based tools for designing apps and websites, Adobe agreed to snap up its budding rival for $20 billion. But regulators in the U.K. said the tie-up would’ve hurt competition, and the companies scrapped the transaction in late 2023. Adobe payed Figma a $1 billion breakup fee.
Figma’s IPO this week represented not only a massive valuation markup for the company but also served as a banner event for Silicon Valley, which has seen a dearth of high-profile IPOs since the market cratered in early 2022 due to soaring inflation and rising interest rates.
“The most important thing to remind myself of, the team of, is share price is a moment in time,” Field told CNBC’s “Squawk Box” on Thursday. “We’re going to see all sorts of behavior probably today, over the weeks ahead.”
Figma declined to make Field available for an interview for this story.
Field’s trek back to the Bay Area, where he’d grown up, began with a TechCrunch article about the fellowship. He submitted his application two hours before the deadline, on New Year’s Eve of 2011, while he was a junior at Brown. He left out his SAT scores.
“It is my belief that the SAT is a poor reflection of aptitude and can easily be gamed,” he wrote in his application, which he posted on LinkedIn years later. In the essay section, he was asked to offer a highly controversial take.
“Chocolate is repulsive,” he wrote. “Even the smell of it makes me want to vomit.”
In response to a question about how he was going to change the world, Field said he was going to build better software for drones, and that he would “cofound a company with the smartest programmer I know and work on this problem.”
That co-founder was Evan Wallace, who had been a teaching assistant for some of Field’s courses at Brown. Wallace was technologically gifted, earning the nickname “computer Jesus,” or CJ. But he was already 20, meaning he was too old to be eligible for a Thiel Fellowship.
Field scored the $100,000 from Thiel, and shared it with Wallace, convincing him to leave his academic pursuits. The pair moved into a small apartment in Palo Alto, California.
The drone software plan had gone out the window. Wallace wanted to develop something related to WebGL, a graphics rendering system for web browsers. A year later, they were showing investors a slick browser-based demo that allowed for the movement of a ball in a pool of water.
‘Anyone can be creative’
The obvious competitive target was Adobe, which was ending development of Fireworks, an app design product that it acquired with the 2005 Macromedia purchase.
“We thought, ‘Wait, maybe there’s an opportunity here,'” Field said on a podcast earlier this year.
“What we’re trying to do is make it so that anyone can be creative, by creating free, simple creative tools in the browser,” Field said in a 2012 interview for a CNBC special on the Thiel Fellowship.
In 2013, the founders started talking with investors about raising a seed round. Field showed the pool water demo to John Lilly of Greylock Partners at a Starbucks in Palo Alto. Lilly had previously been CEO of Mozilla, where an engineer developed software that led to WebGL. He was impressed with what he was seeing, but he didn’t think it had much economic potential.
Figma took on seed funding from Index Ventures and other investors. The founders assembled a small group of employees at an office in Palo Alto. Progress was slow. Early versions of the product failed to impress potential users. Field was micromanaging.
When Figma would show the product to companies in the Bay Area, reception wasn’t always great. Stress was building. Lilly, who ended up leading Figma’s Series A round in 2014, came to the company’s San Francisco headquarters the following August as struggles were mounting. Employees wanted changes.
“We both heard it,” said Danny Rimer, the Index partner who led the seed funding, referring to conversations he and Lilly were having with staffers about Field.
“We sat down with him and explained to him the situation,” Rimer said. “We heard it and we sort of said, ‘Look, this is an impasse. You’re going to have to adapt and change.’ And he heard it and he changed. I think that’s such a great character trait of Dylan, is to hear the information, be objective about it, process it and accept it and act accordingly, if it makes sense.”
Dylan Field, co-founder and CEO of Figma, speaks at the startup’s Config conference in San Francisco on May 10, 2022.
Figma
Around that time, Sho Kuwamoto joined the company. Kuwamoto brought with him experience from Macromedia and Adobe. Four months later, Figma launched its debut product in a free preview.
Field got involved with users. He replied to people on social media who were posting about Figma, telling them they were receiving access to the preview. He also sought out prominent designers.
Companies like Coda and Uber became early adopters. Some designers were excited by the idea of sharing documents by copying and pasting a URL, instead of having to deal with versions, formats and updates. Figma operated in the cloud, providing all the necessary computing infrastructure, so users didn’t need their own powerful graphics cards.
It wasn’t until September 2016 that Figma made the design editor available for free to the general public and made it possible for multiple designers to make changes in a single file simultaneously. That became the killer feature.
The software started gaining traction inside Microsoft. But there was an issue. Microsoft feared that Figma’s lack of a clear business model might lead to a burial in the startup graveyard. Jon Friedman, a design executive at the software giant, visited Figma’s headquarters to deliver the message, Field told CNBC in 2022.
“Look, we’re all worried you’re going to die as a company,” Field recalled Friedman telling him.
The following year, Figma introduced its first paid tier.
By the time venture stalwart Sequoia Capital came on board in 2019, Figma was a hot commodity, raising its Series C round at a $440 million valuation. Sequoia partner Andrew Reed said some of his firm’s portfolio companies had started migrating to Figma, and founders were using it for pitch decks.
“Companies often will show prototypes in board meetings of new products they want to build, and so the first thing we saw a lot of Figma links for was that,” Reed said in an interview this week.
“It was a very easy investment,” Reed said. “We went through some of our old investment voting data. I think Figma might have been the highest vote we ever had for an investment.”
Sequoia’s extensive roster of winners over the decades includes Apple, Google, LinkedIn, Zoom and WhatsApp.
The Adobe period
Financial analysts covering Adobe started asking about Figma. Adobe, which had released the XD app for user experience design, responded, adding the startup to its official list of competitors.
But Adobe’s market capitalization sat above $170 billion, and Figma wasn’t even a “unicorn,” a status reserved for startups worth at least $1 billion. Field told Forbes that some job candidates were hesitant to join because of the modest valuation. In 2020, the company raised a funding round from Andreessen Horowitz at a $2 billion valuation.
Then came Covid. Offices closed. The world went remote overnight. Figma’s collaboration capability suddenly became critical to the way many more people worked.
“We asked ourselves: how can we help teams connect, have fun and enter a flow state during the earliest stages of the design process?” Field later wrote on Twitter.
The result was FigJam, a digital whiteboard that became Figma’s second product, and represented a key step toward diversification.
The Adobe noise continued to get louder. In 2020, Field had discussions with Adobe executive Scott Belsky about a partnership or acquisition, but Field chose to stay the course. Adobe CEO Shantanu Narayen talked to Field about a possible deal in early 2021, but again the Figma CEO demurred, opting to raise a round at a $10 billion valuation.
“Our goal is to be Figma not Adobe,” Field wrote in a 2021 tweet.
The environment quickly changed. By early 2022, with the Fed lifting interest rates to fight inflation, investors were selling out of high-growth tech and rotating into businesses with predictable profits. Sequoia was encouraging its startups to reduce costs.
David Wadhwani, president of Adobe’s Digital Media unit, speaks at Adobe’s MAX conference in Los Angeles, October 2022.
Adobe
Belsky again approached Field in April of that year, this time alongside David Wadhwani, who was leading Adobe’s digital media business.
“Mr. Field expressed openness to understanding the terms of a potential acquisition of Figma by Adobe, and Mr. Field, Mr. Belsky and Mr. Wadhwani continued their discussion of the potential benefits of a combination the following week,” Adobe stated in a regulatory filing.
Field was considering the implications of the rise of artificial intelligence.
“Look, when we did the deal with Adobe in the first place, my head space in 2022 was, “Oh my god, AI is coming. This is clearly exponential as a technology. I don’t know what this does to us. Is this one-tenth our market, is it 10x our market? What does it mean for creatives and designers?” Field said in an interview with The Verge last year. “And I was like, it’s better to team up in this world with Adobe and to navigate this together and to figure this out together than it is to go it alone.”
In September 2022, Adobe agreed to buy Figma for about $20 billion, announcing that Field would remain in charge of his part of the business and would report to Wadhwani.
“Adobe has a unique opportunity to usher in a world of collaborative creativity,” Narayen told analysts on a conference call the day of the agreement. “In my conversations with Dylan at Figma, it became abundantly clear that together we could accelerate this new vision, delivering great value to our customers and shareholders.”
That opportunity never came. An intensifying regulatory environment in the U.S. and Europe had made sizable tech deals more burdensome. Adobe was suddenly in the crosshairs, and the transaction was hitting repeated hurdles.
“We’re worried this deal could stifle innovation and lead to higher costs for companies that rely on Figma and Adobe’s digital tools — as they cease to compete to provide customers with new and better products,” Sorcha O’Carroll, an official at the U.K. Competition and Markets Authority, said in a press release in mid-2023.
Around that time, Field announced another step toward product diversification by introducing Dev Mode, which turns Figma designs into source code that can serve as a starting point for software developers. The reveal came at Figma’s Config user conference in San Francisco, which attracted 8,000 attendees.
The U.K.’s investigation dragged on for months. Field was pulling double duty running the company and engaging with regulators. Adobe had said it expected to complete the deal in 2023, but time was running out. Regulators were proposing remedies that the parties didn’t like.
“Even toward the final months, there were these moments of, ‘Oh, this is going to go through,’ and moments of, ‘F—, what are we doing?'” Field told The Verge. “And obviously at the end, there’s a mutual understanding of,’ This decision has been made for us and let’s call it.'”
On a Sunday in December 2023, Field gathered board members for a 10-minute call, informing them that the deal was off. The official statement followed early on Monday morning.
“It’s frustrating and sad that we’re not able to complete this,” Field told The New York Times.
Not everyone in Field’s orbit saw it that way. Grammarly CEO Shishir Mehrotra, a friend of Field’s and longtime Figma user, said the whole ordeal was having an impact.
“You could see it in his face,” Mehrotra said of Field, adding that he was relieved when he learned Figma would remain independent. “He was getting older right in front of us.”
But Figma had some business concerns. Its net dollar retention rate, a measurement of the company’s ability to sell more to existing customers, slid from 159% in the first quarter of 2023 to 122% by the end of the year, according to Figma’s IPO prospectus. Figma chalked it up to a tough comparison from the year before, thanks to the launch of FigJam, and economic uncertainty that caused some clients to reduce seat counts. The retention rate bounced back to 132% in the first quarter of 2025.
During the 2023 winter holidays, Field considered ways to rally the workforce. After the new year, he announced internally that Figma would give extra equity to employees who joined or received promotions following the acquisition announcement, because the valuation was going back down to $10 billion. He said any employees who wished to leave would get three months of severance, with no hard feelings.
Fewer than 5% of staffers took him up on the offer.
Pivot to prompting
As Figma pursues a go-it-alone strategy, it faces an existential question: Is the company ready for a future dominated by AI?
In May, Field took the stage at Figma’s user conference before 8,500 attendees at San Francisco’s Moscone Center, wearing a black “Config 2025” T-shirt. He walked the crowd through a slew of new products, including Figma Make, which draws on Claude 3.7 Sonnet, a large language model from AI startup Anthropic.
“With Figma Make, you could take an existing design and prompt your way to a fully coded prototype,” Field said.
A product manager, Holly Li, came up for a demo. At a laptop, she copied the design for a music player in the Figma editor and pasted it into a chat box, typing instructions to rotate the album art like a record while a song is playing. She showed apps created with Figma Make, eliciting some cheers, and returned to the demo.
“Okay. This time, the model had a little bit of difficulty, but that’s okay,” she said. The cloudy background image from the original design was gone, and track names became difficult to read. The crowd was silent. She brought up a working version in a different browser tab.
The feature went live last week. Mehrotra said it’s off to a good start.
Other products in the market were built with generative AI in mind. They include Lovable, Miro’s Uizard and Vercel’s v0. Brent Stewart, an analyst at Gartner, said that Figma is “utterly, utterly dominant” in design but that some of the offerings from other companies look more impressive.
Andrew Chan, a former Figma software engineer, wrote in a blog post last year that “an interesting and ongoing question is whether Figma can repeat the success it had in design with other products.”
Nadia Eldeib, a former Lyft product manager and CEO of startup CodeYam, tried Figma Make before the broad launch and put it up against Lovable and v0. Writing on Substack, she said it appeared to be at an earlier stage.
It’s the sort of feedback that Field will read and send to his employees, known as Figmates. He reads support tickets and mentions of Figma’s name on X, formerly Twitter. He took no time off to address such matters on the very day that his company was conducting its IPO, ultimately pricing shares $1 above the expected range.
Yianni Mathioudakis, a creative director in Maryland, tagged Figma in a post on Wednesday, asking if anyone had found a way to take a Figma Make design and bring it into the main design editor.
“Hi Yianni, we are working towards this and very excited about what it will unlock!” Field replied. “Please keep the Make feedback coming!”
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